Sugar Goes from 12-Year Low to 4-Year High: I'll Be a Monkey's Uncle!
Option B: Sugar's comeback was foreseeable -- as far back as April of 2020
by Nico Isaac
Updated: April 21, 2021
In case you thought you were the only one to up your sugar intake during the last year of pandemic lockdowns, think again!
As this long-term chart of sugar prices shows, demand for the sweet commodity has been on a tear. Since April 2020, prices embarked on a 10-month-straight rally to 4-year highs, its longest winning streak since John F. Kennedy was sworn in as the 35th US President in 1961.
According to a February 19, 2021 Bloomberg article, sugar's bull run is especially shocking as it thwarts conventional market trends whereby an excess in supply causes a collapse in price:
"Sugar's surge comes even amid projections for a world surplus in the 2021-2022 season."
"[Thus] valuation seems to reflect a 'perfect storm' of some other factors that go beyond fundamentals."
We couldn't agree more with this viewpoint that sugar's surge is being fueled by factors "beyond fundamentals." So, what has been stoking its gains?
To answer that, we have to go back to when sugar's uptrend began, in April 2020. At that time, sugar was supposedly staring down the industry-wide bear-el of a pandemic-led crash in food prices and production. Recall, April 2020 was when oil experienced its worst crash in history, plunging into negative territory, thus cratering demand for ethanol-based fuel alternatives made from sugar.
That along with a supply surplus caused by restaurant closures and drop in non-essential foods painted this sour picture for sugar's future:
- '"Sugar Market Sours as Oil Slides, Virus Spreads" (March 11 Wall Street Journal)
- "Food Prices Across the Globe Plummet -- Sugar Prices Crash" (April 3 The Dubrovnik Times)
- "Ethanol Demand Slump Puts Brazil Sugar Industry in a Grind" (April 17 Reuters)
As one April 3 Seeking Alpha put it:
"Despite a rush among individual shoppers in several major countries to hoard sugar in the face of COVID-19, traders shouldn't expect to see higher futures prices for the sweet commodity anytime soon."
And yet -- higher prices were exactly what sugar traders saw in the ensuing ten consecutive months.
In turn, other factors "beyond fundamentals" are fueling sugar's trend now just as they were then. We believe those factors are the psychology of investors themselves, which develop in clear Elliott wave patterned setups directly on price charts.
Here, we go back to our April 2020 Monthly Commodity Junctures, where editor Jeffrey Kennedy alerted his subscribers to a bullish trend change in sugar's immediate future via the chart and analysis below:
"As we move from April into May, I do expect a low to form in this sugar market somewhere around the 9.11 area. this is a very, very mature impulsive decline. We're probably better than 90% complete as far as the current selloff.
"In other words, the downside is limited, and the next significant move will be to the upside."
One month later, after sugar prices confirmed a bottom was in place, Jeffrey presented this updated chart of sugar in his May 2020 Monthly Commodity Junctures:
From there, sugar prices sweetened to a 4-year high in February 2021 before catching its breath.
Nothing would sound sweeter than to say that all Elliott wave forecasts unfold with this degree of precision. But that wouldn't be true. Elliott wave analysis isn't fool proof.It is, however, the most objective method we know of for assessing market trends and trade setups on every time frame.
3 new opportunities as sweet as sugar
When you look at price charts, what do you see?
Many investors and traders only see meaningless lines.
You can be a part of a different (far smaller and savvier) group.
Right now, our Commodity Junctures Service shows you markets whose price charts exhibit high-confident setups for near- and long-term opportunities.
Join editor Jeffrey Kennedy on May 6 for a 1-hour webinar to see 3 commodities that must be on your radar.
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